The type of technology transfer that takes place depends on which level of its value stock the firm is using to enter the new market. If the firm is exporting products as they are, then the knowledge that underpins these products is encoded in them. For example, If a German firm is exporting cars to China, knowledge of the car’s engines, transmission, electronic fuel injection, and cooling system, and the linkages between them, is already embedded in the car. So is knowledge of the manufacturing processes that were used to build the car. In either case, the technology transfer is said to be product embodies since the physical product itself is being transferred.

If a firm uses core products to enter the market, the results of the technology transfer are the same as those for exporting fully assembled products if all the firm does is sell the core components to the emerging economy. If it uses the core components to build products for the foreign market, the firm must also transfer the knowledge of how to link the components and manufacture the end product. In the automobile example, the German firm not only exports the drive trains for cars, it also transfers the manufacturing knowledge that is needed to produce the cars locally. The manufacturing knowledge is said to be process and people embodied. The process being transferred is in the form of equipment, flowcharts, blueprints, microcodes, software, routines, and the knowledge embedded in employees. It is more tacit than product-embodied knowledge. The transfer of such knowledge requires personal interaction between the transmitter and the receiver and relatively more absorptive and delivery capacities than the transfer of the more explicit product-embodies knowledge.

If the firm decides to transfer capabilities and the knowledge that underlines them, then the knowledge is a lot more people and process embodied than product embodies. It also has a much larger tacit component to it than the other forms of transfer. This suggests that most of the measures for improving the effectiveness of technology transfer apply. For example, prior to the transfer, employees of the receiver nation can be sent to the transmitter country to study at universities, or to work at research centers or related industries to better prepare for receiving the technology. Training sessions in which members from both nations explore their cultures can help diffuse some of the tensions that occur. The transfer can take the form of joint ventures or acquisitions. During the transfer, continued workshops in the challenges of cultural differences can help keep reducing the impedance mismatch between the two entities.

My Consultancy–Asif J. Mir – Management Consultant–transformserorganizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please contact Asif J. Mir